‘High Attrition will Kill ITeS’

Sharmila works 16 hours a day. Her shift technically begins at 7 in the night
and ends at 4 in the morning. But Sharmila is a manager and has to sit in at
staff meetings. Her managers unfortunately are "day people". So she
goes in for staff meetings at 3 in the afternoon and leaves at 7 am the next
day. Sharmila is planning to quit her job.

This is an easy way to start a story. Give a couple of examples –usually
fictitious–and rest your case. But these are real stories of hundreds of call
center professionals that show up in attrition rates of up to 30% in the Indian
IteS industry. But this story is not about the sorry state of Sharmila or others
like her. This is about how high attrition rates form an unsustainable business
model. Ask the expert–Simon Roncoroni–who’s been a consultant for the
contact center in the industry for years.

At a presentation at Nasscom 2003 mid February, Roncoroni warned the ITeS
industry, "the real cost of staff turnover is significantly higher than any
calculation I have ever seen by any company". A key component of product
performance, he says, for instance, is staff satisfaction. However the contact
center industry is in many ways unique. "while in most businesses it takes
18 to 36 months for staff satisfaction to hit business performance, in a contact
center that impact is felt within 3 to 9 months."

And one of the first signs of employee dissatisfaction–high attrition.
According to Roncoroni, the outsourcing industry per se suffers from higher
attrition than other industries almost everywhere in the world. In the UK, for
instance, attrition in the utilities sector is about 10%, in logistics about 30%
and in all sectors about put together 25%. But in the outsourcing industry alone
attrition rates is as high as 40%.

"Outsourcers probably have the worst time of it. They have huge pressure
on price by clients and especially in UK the contact center industry does not
have a very good reputation. It’s basically known as a low pay, high pressure
sector." However, do the high growth rates in India mean that the Indian
contact center industry is unique?

India traits

Well, yes and no. Apart from the pressures that an outsourcer normally faces
, the Indian sector is also characterized by rapid growth (and its associated
issues), mostly unsocial hours, limited experience, explosion in the supplier
base and severe price competitiveness within the country.

Roncoroni–lest he be misunderstood–is a strong votary of the Indian IteS
industry. He just believes that the staffing and growth strategy of the sector
is all wrong. The UK and the US for instance, he says, took 20 years to grow
their business.

They built an experience base and had local industry to draw upon. "The
Indian industry, on the other hand, is growing at breakneck speed, adding 100s
of new seats in no time at all and has no local industry to draw upon." All
of which, according to the consultant, will lead to severe retention problems in
the industry. "You are already creating micro inflation at all levels as
you fight each other and you are accelerating your own costs with high attrition
rates. You could kill yourself all on your own at this rate," he warned.

The labor arbitrage model

It’s not a very popular notion in an industry that believes bodies are
easily replaceable in a country like India where there are thousands of
graduates going begging for a job. Roncoroni’s major concern however is high
costs in lost productivity as about 30% of a call center’s population moves
out every year. This is an addition to the Rs one lakh odd that each company
spends on each employee as training costs. It’s not about whether the bodies
are replaceable.

The bottomline message–high staff turnover is not acceptable for a company.
It shows up quickly in company productivity and quality of service. And that
will show up directly on the balance sheet. "Corporates come here for hard,
unemotional reasons of cost at reasonable quality. If quality suffers they will
simply move elsewhere. Within the whole issue of attrition–if not addressed–lies
the seeds of your own demise."

SARITA RANI